The euro moved a step higher on Friday and managed to rise above the 1.3100 mark versus the dollar despite a lack of significant progress at the European Leaders summit and soft eurozone CPI and employment data.
EUR/USD pushed through tough resistance and reached its highest level in 2 months at the 1.3140 zone as the greenback remains under pressure since the Federal Reserve introduced new easing measures on Wednesday.
However, despite the further easing from the Fed and some positive developments from Europe earlier this week, the EUR/USD has struggle to make decisive moves as investors remain focused on US budget talks, where limited progress has been made so far.
"While we are hesitant to take a stronger directional view, particularly with thin trading conditions likely around year-end, we still expect U.S. budget talks to run into some challenges thus have a slight bias towards U.S. dollar strength and foreign currency weakness", said Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank.
Meanwhile, technically speaking …
The EUR/USD keeps a positive tone in short term charts, although the 1.3140 area should offer strong resistance and is to be seen whether the euro could pick up enough strength to break this level. If the EUR/USD does pierce it, the immediate bullish target would be 1.3170, which is the top of the last 3-month range.
On the contrary, loss of 1.3100 could drag the pair toward 1.3060, next support in line. A break below this latter could suggest lack of strength and a period of consolidation ahead.
In this line, the TD Securities team notes that for the EUR, the underlying trend still looks positive from a technical perspective despite the region's relative fundamental weakness. "The single currency made a marginal new local high overnight that tested the neckline of the head & shoulders continuation pattern on the daily chart (near 1.3120), they commented. "From a longer term perspective EUR/USD is also currently trading above the neckline of a head & shoulders formed on the weekly chart since late last year. That comes in at 1.3053, and a close above there would be constructive for the weeks/months ahead".